What is the real state of our economy? We should start dissecting the unemployment data. We have two sets of unemployment data. The DOL reports every month, the prior month U-3 unemployment rate, called the official unemployment rate. Then, there is the other unemployment data, often referred to as the “real” unemployment. rate.
The Bureau of Labor Statistics (BLS) publishes data with the definition of “alternative measures of labor underutilization” [1] The latter BLS site, Table A-15, U-6 shows a July 2011 nationwide {seasonally adjusted}, total unemployed rate of 16.1% (California is worse at 21.8%). In contrast, the published official July 2011 DOL U-3 unemployment rate was a reported 9.1%. The difference between the U-3 rate and Table A-15 U-6 rate are some 10 million individuals out of work. (based on total civilian ” non-farm” labor force).
Monitoring our unemployment rate, we see one “grey” area, referred to as “individuals stopped looking for work”. We have no real clarification how the Labor Department arrives in tabulating millions of individuals that exhausted unemployment benefits, and are no encompassed in the system. How does the Labor Department account for a person that starts looking for work, stops looking for work ? when he/she is not accounted for in their system and has no benefits any longer?
We should also apply more scrutiny to the collection of unemployment data. It seems, the flaw lies in the collection of unemployment data samples, when the DOL contacts 60,000 households, representing a cross section of the entire US population. Although, every month, one-fourth of the called households in the survey sample are changed, the question is one of : “will we get a different monthly unemployment rate, by calling a different set of 60,000 households?